A new round of mortgage rules has once again been announced by the federal government in an effort to transfer risk away from lenders to owners. These new rules will include a ‘stress test’ for all uninsured mortgages. The stress test would require home buyers (or investors) who, despite placing a large down payment of 20% or greater, be subject to proving they can afford to withstand an additional 2% interest rate increase above the posted rate to qualify.
These new rules (on top of the previously announced rule tightening) will potentially impact the pool of qualified buyers. It appears the goal of the government is to tighten mortgage qualification standards in order to further cool the red-hot Toronto and Vancouver housing markets.
There is a benefit to Armchair Landlords with these new rules. The positive outcome for ACLs is twofold. First, these new rules have the potential to push many would be landlords out of the market. Since fewer landlords will qualify to buy rental properties, there will be fewer rental properties available in the market. Through simple supply and demand fundamentals, rents should at least be stable, if not turn higher, as a result of these new rules, regardless of the impact they have on the housing market.
Secondly, Albertans now finding new employment opportunities and financial relief from steady economic growth will once again be able to afford monthly mortgage payments but will be at risk of mortgage financing rejections and non-renewals on their current mortgages. This will increase the number of homeowners looking for long-term solutions to remain in their homes. The ACL program offers such solutions. As the number of quality high income and high equity tenant-buyers increase, Armchair Landlords can expect some lucrative deals for reasonable prices and greater ROIs in the next year.
With the new mortgage changes slated to take effect towards the end of the year, we encourage all current and potential Armchair Landlords to contact us to see about qualifying for your next opportunity and discuss the options we currently have available to you.